Data table Static budget variable overhead 7,800 Static budget fixed overhead %24 3,900 Static budget direct labor hours 1,300 hours Static budget number of units 5,200 units Watson allocates manufacturing overhead to production based on standard direct labor hours. Last month, Watson reported the following actual results: actual variable overhead, $10,500; actual fixed overhead, $2,770; actual production of 6,800 units at 0.30 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,300 static direct labor hours / 5,200 static units). %24
Data table Static budget variable overhead 7,800 Static budget fixed overhead %24 3,900 Static budget direct labor hours 1,300 hours Static budget number of units 5,200 units Watson allocates manufacturing overhead to production based on standard direct labor hours. Last month, Watson reported the following actual results: actual variable overhead, $10,500; actual fixed overhead, $2,770; actual production of 6,800 units at 0.30 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,300 static direct labor hours / 5,200 static units). %24
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Topic Video
Question
![Requirements
1.
Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
Explain why the variances are favorable or unfavorable.
2.
Requirement 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, foxed overhead cost variance, and foxed overhead volume variance.
Begin by selecting the formulas needed to compute the variable overhead (VOH) and fioxed overhead (FOH) variances, and then compute each variance amount.
Actual overhead - (Actual hours x Standard price)
(Actual hours - Standard hours allowed) x Standard price
Actual overhead - Budgeted overhead
Budgeted overhead - Allocated overhead
= VOH cost variance
%3D
Data Table
= VOH efficiency variance
%3D
|= FOH cost variance
= FOH volume variance](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fac4958bc-2dae-4df9-8b0f-7a43d89259b8%2Ff800d3c6-9687-498f-b774-b0979eedd44c%2Fxfisp5j_processed.png&w=3840&q=75)
Transcribed Image Text:Requirements
1.
Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
Explain why the variances are favorable or unfavorable.
2.
Requirement 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, foxed overhead cost variance, and foxed overhead volume variance.
Begin by selecting the formulas needed to compute the variable overhead (VOH) and fioxed overhead (FOH) variances, and then compute each variance amount.
Actual overhead - (Actual hours x Standard price)
(Actual hours - Standard hours allowed) x Standard price
Actual overhead - Budgeted overhead
Budgeted overhead - Allocated overhead
= VOH cost variance
%3D
Data Table
= VOH efficiency variance
%3D
|= FOH cost variance
= FOH volume variance
![Data table
Static budget variáble overhead
7,800
Static budget fixed overhead
$4
3,900
Static budget direct labor hours
1,300 hours
Static budget number of units
5,200 units
Watson allocates manufacturing overhead to production based on
standard direct labor hours. Last month, Watson reported the
following actual results: actual variable overhead, $10,500; actual
fixed overhead, $2,770; actual production of 6,800 units at 0.30
direct labor hours per unit. The standard direct labor time is 0.25
direct labor hours per unit (1,300 static direct labor hours / 5,200
static units).
%24](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fac4958bc-2dae-4df9-8b0f-7a43d89259b8%2Ff800d3c6-9687-498f-b774-b0979eedd44c%2F70l593j_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Data table
Static budget variáble overhead
7,800
Static budget fixed overhead
$4
3,900
Static budget direct labor hours
1,300 hours
Static budget number of units
5,200 units
Watson allocates manufacturing overhead to production based on
standard direct labor hours. Last month, Watson reported the
following actual results: actual variable overhead, $10,500; actual
fixed overhead, $2,770; actual production of 6,800 units at 0.30
direct labor hours per unit. The standard direct labor time is 0.25
direct labor hours per unit (1,300 static direct labor hours / 5,200
static units).
%24
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